Greece hopes to secure vital reform deal next week


Rolling business and financial news, as Athens races to produce a list of reforms to satisfy its lenders by next Monday

A combination of concerns left global markets lower, with a rising oil price on Middle East tensions adding to the worries about Greece and the state of the US economy. By the close of play European markets had come off their worst levels with Wall Street – down sharply overnight as Saudi Arabia’s military action in Yemen pushed crude prices higher – staging a slight recovery. The closing scores showed:

It’s becoming a little unclear how strong the US economy is, but there is now a general perception that the Federal Reserve will soon be raising interest rates regardless, if not in June then probably by September.

Now James Bullard, president of the St Louis Fed, has repeated his view that the risks of keeping interest rates low for too long “may be substantial.” In a lecture in Frankfurt Bullard – who is a non voting member of the Fed’s board this year – said:

Now may be a good time to begin normalizing U.S. monetary policy so that it is set appropriately for an improving economy over the next two years. Even with some normalization, policy will remain exceptionally accommodative.

If a bubble in a key asset market develops, history has shown that we have little ability to contain it. A gradual normalization would help to mitigate this risk while still providing significant monetary policy accommodation for the U.S. economy.

Speaking of Draghi, he has been explaining to the Italian Parliament that the ECB cannot buy Greek bonds as part of its quantitative easing programme. From Reuters:

“QE does not buy Greek bonds for three reasons. The first is that it doesn’t buy bonds of countries that are in a programme with the IMF and the European Commission when the review of this programme has not been completed. As you know, in Greece the review was suspended,” Draghi told Italian lawmakers.

Draghi said the other reasons for not buying Greek bonds were that their credit rating was too low and that the ECB could not buy bonds from a country above a certain percentage – to avoid “arriving at a point where it becomes a country’s biggest creditor”.

Meanwhile German finance minster Wolfgang Schäuble has said low interest rates were causing considerable problems in Germany, there was too much central bank money and debt in the world and there was risk of a bubble forming.

German FinMin Schäuble says #ECB QE program removes incentive for reforms.

A low interest rate leads to a misallocation of resources with all the risks and side-effects that you see when bubbles are forming.

Kansas Federal Reserve vice president and economist Chad Wilkerson said:

We saw our first monthly decline in regional factory activity in over a year. Some firms blamed the West Coast port disruptions, while producers of oil and gas-related equipment blamed low oil prices.

And more signs of weakness in the US economy:

Kansas City Fed Manufacturing Activity (Mar) -4 versus 1 expected, previous 1

Kansas City Fed respondent: ‘We do not see the economy as being as strong as a portrayed in the national media reports."

Kansas City Fed: ‘ Momentum we experienced earlier this year has left and we are again cost cutting and becoming lean"

European Central Bank President Mario Draghi said bond-buying by the central bank has brought down long-term interest rates and lowered the euro’s exchange rate against the U.S. dollar, writes Reuters.

“The effect on the exchange rate has been undoubtedly significant,” Draghi said during testimony in parliament on Thursday, noting also the decline in long-term interest rates.

ECB’s Draghi: Euro zone is probably the part of the world with the highest taxes and this inevitably weighs on growth.

ECB’s Draghi: Says ‘ECB Is Very Favourable To EU Investment Plan,’ Must Begin As Soon As Possible

DRAGHI SAYS NO DOUBT GERMAN TRADE SURPLUS INFRINGES EU RULES ON EXCESSIVE IMBALANCES

More from Draghi in the Italian parliament:

Draghi: High reliance on bank financing in the Eurozone is consequence of large number of small businesses in the area. #ECB

Draghi: Compared to US, fiscal consolidation in Eurozone has gone faster. This has had recessionary effects. #ECB

Draghi: One may not like banks and markets, but they are the channels through which the ECB acts.

Draghi: A more favourable economic situation (as a result of ECB action) will make it easier to implement structural reforms.

Time for a recap.

With time running out, the Greek government has declared that it will reach a deal with its creditors next week.

“I think at the beginning of next week we will have a deal, both over the reform package proposed by the Greek government, and over the flow of funding,”

#Greece Feb deposit outflows at €7.64 bln from €12.79 bln in Jan (BoG). #economy #banking pic.twitter.com/zgl8QNU8Ik

private depositors withdrew €20.8bn from their accounts dec-feb, according to Bo#Greece data. hardly a sign of confidence in political devts

where did the money go? abroad, consumption, taxes, under the mattress? certainly there’s some data for the first three? #greece

“The conflict has the potential to act as a drag on oil supplies as most oil tankers from Arab producers must pass by the Yemen coastline in order to get through the Red Sea and Suez Canal.”

The Bank of England has identified the Greek crisis as a “significant risk” to the UK economy.

In its latest report, the Bank’s financial policy committee said:

“International and geopolitical risks to financial stability in the United Kingdom persist. Despite recent encouraging signs, the risk of a low nominal growth in the euro area persists.

“There are also risks associated with a further slowdown in China and to some emerging economies as the stance of monetary policy begins to diverge globally. There also remain significant risks in relation to Greece and its financing needs, including in the near term.

Related: Bank of England warns of danger to markets from Greece and China

Addressing Italian MPs, Draghi stressed several times € not responsible for crisis. Shows he’s aware support for € is eroding in Italy.

Mario Draghi is urging Italian MPs not to assume that the eurozone is fixed. We’re seeing a cyclical recovery, he says.

Draghi: This recovery is not structural. It’s cyclical. I insist on the word ‘cyclical’. #ECB

Draghi: No sign of bond shortage so far. We intend to carry on with QE at least until September 2016. #ECB

Draghi adds that the ECB has ‘removed doubts’ over the reversibility of the euro.

Heads-up: ECB chief Mario Draghi has begun speaking in the Italian parliament, reminding MPs that his powers are limited:

ECB President Draghi now addressing Italian MPs, reminds them that monetary policy can’t solve the structural problems of an economy.

Scotland’s oil industry continues to suffer from the drop in the oil price since last summer.

Royal Dutch Shell has announced that it is cutting more than one in 10 of its North Sea workforce.

Related: Shell to cut at least 250 North Sea jobs to remain ‘sustainable’

Just in: the number of Americans filing new claims for unemployment benefit fell by 9,000 last week to 282,000.

That’s a five-week low, and might possibly calm some of the worries about the US economy. Alternatively, it could fuel concerns that the Federal Reserve will take the plunge and raise interest rates in June….

Over in Athens, former prime minister Antonis Samaras has raised the stakes by making public the bailout extension accord which finance minister Yanis Varoufakis agreed with creditors on February 20.

“We are making the text public so that every Greek citizen can see it and understand it.”

Σαμαράς: Να εφαρμόσει η κυβέρνηση όσα υπέγραψε στις 20 Φεβρουαρίου http://t.co/AImFbJvq1r pic.twitter.com/ywxDT5xinl

ΝΔ: Στη δημοσιότητα η συμφωνίας της 20ης Φεβρουαρίου με τις υπογραφές του Βαρουφάκη (ΥΠΟΙΚ), Στουρνάρα (ΤτΕ) pic.twitter.com/zGQBSEb5f2

Newsflash from Reuters:

Bloomberg have pulled together a handy timelines of Greece’s financial obligations over the next five months, including maturing bonds and repayments to the IMF and the ECB. Worth bookmarking.

Next big deadline for Greece is Monday. For complete list of dates to watch, see our timeline: http://t.co/N4I9wGO2k1 pic.twitter.com/ebMA9ZOOI3

A new survey from the CBI has shown that Britain’s retailers are more positive, echoing this morning’s decent retail sales figures (see here).

A total of 34% of respondents told the CBI that sales volumes rose in March, compared with a year ago, and 15% said they were down, giving a rounded balance of +18%. Last month, the balance was just +1%.

“Sales have recovered following a tough month in February for retailers, and we expect solid growth to continue through Easter.

“The outlook ahead is looking bright, with household incomes buoyed by zero inflation and improving pay packets, which will continue to encourage spending.

Italy just sold two-year bonds at a record low yield of just 0.162%.

That’s a remarkably low cost of borrowing, showing the impact that the ECB’s new bond-buying programme continues to have on the markets. It also suggests traders don’t expect eurozone inflation to pick up anytime soon.

*ITALY SELLS 2017 ZERO COUPON NOTES AT RECORD LOW 0.162%

RT @lemasabachthani *ITALY SELLS 2017 ZERO COUPON NOTES AT RECORD LOW 0.162% << also zero inflation though

Over in Greece, opposition New Democracy parliamentary spokesman Kyriakos Mitsotakis has issued a warning that the country could go bankrupt by Easter.

“We are bankrupt and it is clear the state is running out of money.”

It’s not a full-blown run, yet, but Greece’s banking sector continues to suffer from a slow shuffle to the exits.

Deposits fell by €7.8bn in February, according to new ECB data today, as some savers pulled out cash.

Greek bank deposits fell by €7.8bn in Feb (following a record €12.2bn drop in Jan). Here’s the broader picture. pic.twitter.com/IOSveKUFzm

The selloff in the European stock markets has accelerated, with all the main indices shedding at least 1% so far this morning.

London’s FTSE 100 has shed 85 points, in a broad-based selloff.

US futures are tumbling again today. pic.twitter.com/kWO84JC0R7

Related: London Stock Exchange drops as Dubai sells stake

Rob Wood of Berenberg Bank isn’t surprised to see UK retail sales rising so strongly last month.

Explaining this is not rocket science. Cheaper petrol, food and import prices are cutting shop prices fast, leaving consumers with a little more money to spare after buying essentials.

And UK consumers being the shoppers they are tend to spend that extra disposable income.

UK retail sales jumped last month, indicating that British consumers are upbeat about economic prospects ahead of May’s general election.

Volume of sales at household goods stores up 9.1% in last year. That’s a strong sign of consumer confidence.

Another encouraging sign for the eurozone: Money supply across the single currency region jumped by 4% last month, the fastest rise in almost six years.

4% M3 growth for the eurozone – strongest since April ’09. pic.twitter.com/xh6DGcgwt0

Spain’s economic recovery appears to be gathering pace.

The Bank of Spain has raised its growth forecast for 2015 to a punchy 2.8%, and predicted that the economy expanded by 0.8% in the first three months of this year.

More good economic news for #Spain RT @ForexNews87 Bank of Spain says sees Q1 Gdp up 0.8 Pct from Previous Quarter http://t.co/xlq340xRrB

Anxiety over Greece’s bailout is hitting its stock market this morning, despite economy minister George Stathakis predicting a deal early next week.

The ATG index of leading shares has dropped by 2.5% in early trading, led by financial stocks:

#Greece yields 3y 19.83%; +19 bps 5y 15.62%; +16 bps 10y 10.94%; +1 bps 15y 10.82%; -1 bps

The Russian ruble has jumped by 1.5% against the US dollar , on the back of the oil price spike.

#Russia Ruble rallies on higher #oil price. pic.twitter.com/7cAs0Ocmug

The oil prices has surged this morning, after Saudi Arabia launched military action against rebels in Yemen, raising the prospect of wider conflict in the Middle East.

The price of a barrel of Brent crude has jumped by 6%, or over three dollars per barrel, to $ 59.50.

#Oil extends gains on Yemen escalation. Brent crude up >6%.http://t.co/Jb7MihRpcI pic.twitter.com/mEODpwV7wj

The advance set the stage for a confrontation between Iran, which backs the rebels also known as Ansar Allah, and regional powers eager to halt the broadening of the Islamic Republic’s regional influence

Related: Saudi Arabia launches Yemen air strikes as alliance builds against Houthi rebels

Geo-political risk back in #oil traders minds…oil price spikes as Saudi & allies start targeted bombing in Yemen. WTI +18% last 5days

European stock markets have opened in the red, tracking losses on Wall Street following yesterday’s weak US data (see opening post for details).

Germany is the biggest faller, with the DAC shedding 1.4%.

DAX down 200 points at 8.06am – FTSE -40 points at 6950

While Greeks fret about potential bankruptcy, Germans are their most confidence in over 13 years.

GfK’s monthly survey of German consumer confidence has hit 10.0, up from 9.7% a month ago, which is the highest since October 2001.

“If a Grexit, where Greece renounces the euro and subsequently leaves the euro zone, were in fact to materialise, the German economy could suffer a severe setback as a result.”

Germans on a shopping binge: GfK consumer confidence increased to 10.0, highest level since Oct2001. (via ING) pic.twitter.com/SNMuH08kOr

George Stathaskis’s comments suggest that eurozone finance ministers may gather in Brussels early next week to discuss the Greek crisis again, and potentially release some aid.

The Greek government has declared it is confident that it can reach a deal on its economic reforms with the rest of the eurozone early next week.

Economy minister George Stathakis told Antenna TV this morning that a breakthrough – which would stave off the risk of bankruptcy – could be just days away.

“I believe that at the beginning of next week we will have an agreement on the package of reforms the Greek government is proposing, and on the funding of the country.”

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

It looks like another day dominated by Greece debt worries. Athens has until Monday to present a convincing set of economic reforms to its lenders, and its cash reserves are looking increasingly stretched.

In a balancing act not seen by any European administration in recent times, the cash-strapped coalition has sequestered the reserves of public bodies, seized EU subsidies destined for farmers and postponed all payments for state supplies in the scramble to continue servicing its debt and paying salaries and pensions.

Pension funds have been raided to raise money for Treasury bill auctions.

Related: Greek government takes desperate measures in battle to stay afloat

#Greece Gov’t officials say detailed reform list to be delivered Monday, hope for #Eurogroup meeting Tuesday + unfreeze of subtranche.

Investors appear to be caught in two minds as to the health of the US economy, with the Federal Reserve on the one hand apparently gearing up for a rate rise, at the same time as revising down their growth and inflation expectations.

This uncertainty has not been helped by further disappointing US economic data, which has served to undermine investor confidence further.

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Business | The Guardian